Monetary Policy with a touch of Basel

October 1, 2001

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Format: Chicago

Ralph Chami, and Thomas F. Cosimano Monetary Policy with a touch of Basel, (USA: International Monetary Fund, 2001) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in bank reserves. However, with only a small portion of bank deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed. Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks. This paper explores the implications of Basel capital requirements for monetary policy. In particular, we identify a "bank balance-sheet channel" of monetary policy, which operates through the impact on the money stock and the economy.

Subject: Bank credit, Banking, Basel Core Principles, Capital adequacy requirements, Deposit rates, Financial institutions, Financial regulation and supervision, Financial services, Loans, Money

Keywords: Accelerator effect, Bank behavior, Bank capital, Bank credit, Banking industry, Basel Core Principles, Capital adequacy requirements, Capital constraint, Capital requirements, Deposit rates, Global, Loan rate, Loans, Monetary policy, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/151
Stock No:

WPIEA1512001
ISBN:

9781451857030
ISSN:

1018-5941

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